[bjnortier_hn]

If you watch his "Free to choose" series (http://www.ideachannel.tv/), Friedman blamed the Fed for the depression because they didn't keep the money supply stable. Because of bank failures the money supply decreased by a 3rd. He never advocated massively increasing the money supply. In fact, he has been consistently against printing money because of it's leading to inflation.

You can interpret his comments on the BOJ in the article that he would support buying government bonds only as a way to provide liquidity to banks. In the current US scenario, the banks and corporations have enough capital, so I cannot see that Friedman would support QE2.

P.S. "Friedman believed in the power of money". Nonsense. He believed in the power of individual freedom.

[nerfhammer]

Sorry, I don't think that is accurate.

Quoting wikipedia:

"[Friedman] claimed that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did. With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing."

Intervening to prop up failing banks and creating money to buy bonds? Sounds a lot like... TARP.

[bjnortier_hn]

Which Wikipedia article?

There's a difference between propping up a failing bank (which I believe Friedman would be against) and providing liquidity to the banking system when a bank run occurs on a well-capitalised bank (which I believe he would support).

If you watch the Volume 3 "Anatomy of Crisis" about the depression, when a run on the Bank of the United States occurred despite it's being a sounds entity (when it was liquidated it paid back 92.5 cents on the dollar). It's failure created a domino effect according to Friedman. So he supported providing liquidity in that scenario.

I don't believe Friedman would support QE[2] when the banks are well capitalised. My interpretation of his ideas is that he supported a stable money supply, and Friedman was definitely against printing money in general.

That being said, the ideas I'm referencing were expressed in a time when inflation was a big problem.

I wish he were alive today, I would be very interested in his opinion.

[nerfhammer]

Quote is from en.wikipedia.org/wiki/Great_Depression

[billswift]

If you read several of his books, you will understand that he believed in both. Money supply is the most important influence on the systemic level; but his belief in money is largely a belief in trying to keep things steady so the economy is reasonably predictable for individuals participating in it.

[CWuestefeld]

I don't understand the downvote for this (so I voted it back to 1).

Generally speaking, the idea expressed here matches my own understanding (though I'm more specifically familiar with Hayek and Mises). Can anyone explain why bj_nortier_hn is wrong?

[bjnortier_hn]

Downvoting it without posing a counter-argument doesn't help me in examining my own subjective beliefs. If I'm wrong, I want to know why.